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28

Jun, 2016

Exposure at Default: IFRS 9 Ramifications

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Under IFRS9 Framework, impairment assessment requires computation of Expected Credit Loss (ECL) that reflects a probability-weighted outcome, the time value of money and the best available forward-looking information. The ECL can be computed using cash shortfall approach or modular approach using risk parameters like PD, LGD, EAD and Maturity. Of these, we have discussed PD and LGD in detail in our previous blogs. In this blog we intend to touch upon Exposure at Default (EAD). Exposure at Default (EAD) is an estimate of a financial institution’s (FI) exposure to its counterparty at the time […]

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31

Mar, 2016

Target Operating Model – Engaging with the Auditors early

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As the methodologies for IFRS 9 Implementation are still evolving, many banks are in the process of developing a roadmap towards implementation and are still evaluating methodologies that are likely to conform to the principles of proportionality and materiality. To meet the January 2018 deadline, several banks will not be able to embrace a textbook implementation, and will have to adopt practical approaches to several principles espoused in the guidelines. In our blog ‘Impairment Modelling – No silver bullets’, we spoke about the options that banks have with respect to […]

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25

Mar, 2016

Impairment Modelling

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The new standard on financial instruments accounting – IFRS 9 has significantly transformed banks’existing impairment assessment to address concerns about “too little, too late” provisioning for loan losses.In our previous blog i.e. “Stage Assessment – Devil is in the detail” we discussed how lifetime PDs are used for stage assessment of instruments, apart from other nuances of assessing significant deterioration of credit quality. Entities are required to recognise an allowance for either 12-month or lifetime Expected Credit Losses (ECLs), depending on whether there has been a significant increase in credit […]

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